PAYE umbrella contractors concerned about their future prospects may be disheartened by figures just released by the Office for National Statistics, which suggest that the UK has indeed slipped back into recession.
The economy shrank by 0.2% in Q1 2012, largely thanks to a dramatic fall in construction output. As the economy shrivelled by 0.3% in the last quarter of 2011, the latest figures meet the official definition of recession, which is two consecutive quarters of negative growth.
It should be noted, however, that these figures are an estimate and will be revised at least twice in the months ahead. They reveal that the only area to have experienced growth was the service sector, which grew by a risible 0.1%. Production industries shrank by 0.4% (although manufacturing did not decline) but construction went into freefall, nosediving by three full percentage points. Construction only accounts for 7% of the UK’s economy, but its precipitous fall was enough to drag the overall figure into negative growth.
Jobbing contractors working through umbrella companies or limited companies need not reach for the Prozac just yet, however. The Chief Economist at the Institute of Directors, Graeme Leach, conceded that the figures were “not good news”, but added: “These are relatively small falls, so we shouldn’t be too alarmist.”
Mr Leach believes that the “missing link” in the path to growth is confidence. He said: “[But] regardless of the figures, it is the message that comes out to business – to be cautious – exactly when we want them to be a little more aggressive in terms of recruitment and investment.”